Needing Pork, China Is to Buy a U.S. Supplier; ‘Smithfield’

China’s pig dumping scandal puts spotlight on illegal pork trade

By Peter Ford, Staff writer / March 14, 2013

On Wednesday, 46 men were jailed for selling meat from sick pigs near where farmers were believed to dump some 6,000 diseased pigs into a river that supplies drinking water to Shanghai.

BEIJING

The 6,000 rotting pigs floating toward Shanghai may pose a public health problem, but at least they are not part of a much greater threat. If they had not been thrown into the Huangpu River, it is emerging, they might well have ended up on dinner plates.

The discovery of the dead pigs has thrown a spotlight on a little-known practice that insiders say is not uncommon inChina: Farmers sell pigs that have died from disease to underground traders, who then sell the pork illegally to consumers and food processing firms.

In the past two years at least six other similar cases have come to court in different parts of China, suggesting that the practice is widespread. 

“The pig mortality rate is high and farmers sell the carcasses to people in the illegal business so as to recoup some of their losses,” says Feng Yonghui, an analyst with Zhongkeyiheng, an agri-business consultancy in Beijing.  MORE

China has replaced the U.S. to become the world’s largest consumer of pork. The country has a national pork reserve that it releases when prices soar.

Demand for pork in China reflects its booming economy and rising middle class. But that rapidly growing appetite has strained its food production systems, leading to breakdowns and a number of food safety scandals.

Now China’s biggest pork producer, seeking plentiful supplies and technical expertise, has agreed to buy Smithfield Foods, the 87-year-old Virginia-based meat giant with brands like Armour and Farmland, for $4.7 billion in cash.

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If completed, the deal that was announced on Wednesday would be the biggest takeover of an American company by a Chinese concern. But it must first overcome skepticism in Washington — and a potentially close examination process by United States regulators. Both Smithfield and its suitor, Shuanghui International, said that they will submit the deal for review by the Committee on Foreign Investment in the United States, or Cfius, a panel of government agencies tasked with clearing deals for national security.

Typically, the committee is concerned with acquisitions that involve technology or vital natural resources. The nation’s food supply chain is not specifically mentioned in its mandate, but the panel’s jurisdiction is considered broad. Among the deals it has reviewed and approved in recent months are the proposed takeover of Nexen Energy by a Chinese oil company and the proposed sale of control of Sprint Nextel to a Japanese telecommunications firm.

The committee may consider whether Shuanghui has ties to organizations like the Chinese army, as well as whether Smithfield’s customer rolls include sensitive information like the locations of secure military installations.  <>

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